The Hedgehog (Hh) and Wnt signaling pathways are crucial for development as well as for adult stem cell maintenance in all organisms from Drosophila to humans. Aberrant activation of these pathways has been implicated in many types of human cancer. During evolution, organisms have developed numerous ways to fine-tune Wnt and Hh signaling. One way is through extracellular modulators that directly interact with Wnt or Hh, such as the Wnt inhibitory factor (Wif-1) family of secreted factors. Interestingly, Wif-1 family members have divergent functions in the Wnt and Hh pathways in different organisms. Whereas vertebrate Wif-1 blocks Wnt signaling, Drosophila Wif-1 [Shifted (Shf)] regulates only Hh distribution and spreading through the extracellular matrix. Here, we investigate which parts of the Shf and human Wif-1 (WIF1) proteins are responsible for functional divergence. We analyze the behavior of domain-swap (the Drosophila and human WIF domain and EGF repeats) chimeric constructs during wing development. We demonstrate that the WIF domain confers the specificity for Hh or Wg morphogen. The EGF repeats are important for the interaction of Wif-1 proteins with the extracellular matrix; Drosophila EGF repeats preferentially interact with the glypican Dally-like (Dlp) when the WIF domain belongs to human WIF1 and with Dally when the WIF domain comes from Shf. These results are important both from the evolutionary perspective and for understanding the mechanisms of morphogen distribution in a morphogenetic field.